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The selective use of emergency shipments for service-contract differentiation

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  • Alvarez, E.M.
  • van der Heijden, M.C.
  • Zijm, W.H.M.

Abstract

Suppliers of capital goods increasingly offer performance-based service contracts with customer-specific service levels. To handle such differentiated service levels, we use selective emergency shipments of spare parts. We apply emergency shipments in out-of-stock situations for combinations of parts and customer classes that yield service levels close to the class-specific targets. We develop two heuristics to solve this problem. An extensive numerical experiment reveals average cost savings of 4.4% compared to the one-size-fits-all approach that is often used in practice. Furthermore, it is particularly beneficial to combine our policy with critical levels, which yields an average cost saving of 13.9%.

Suggested Citation

  • Alvarez, E.M. & van der Heijden, M.C. & Zijm, W.H.M., 2013. "The selective use of emergency shipments for service-contract differentiation," International Journal of Production Economics, Elsevier, vol. 143(2), pages 518-526.
    • Handle: RePEc:eee:proeco:v:143:y:2013:i:2:p:518-526
    DOI: 10.1016/j.ijpe.2012.02.019
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    Cited by:

    1. Christiane B. Haubitz & Ulrich W. Thonemann, 2021. "How to Change a Running System—Controlling the Transition to Optimized Spare Parts Inventory Policies," Production and Operations Management, Production and Operations Management Society, vol. 30(5), pages 1386-1405, May.
    2. Alvarez, E.M. & van der Heijden, M.C. & Vliegen, I.M.H. & Zijm, W.H.M., 2014. "Service differentiation through selective lateral transshipments," European Journal of Operational Research, Elsevier, vol. 237(3), pages 824-835.
    3. N. Knofius & M. C. Heijden & A. Sleptchenko & W. H. M. Zijm, 2021. "Improving effectiveness of spare parts supply by additive manufacturing as dual sourcing option," OR Spectrum: Quantitative Approaches in Management, Springer;Gesellschaft für Operations Research e.V., vol. 43(1), pages 189-221, March.
    4. Mohammed Hichame Benbitour & Evren Sahin & Yves Dallery, 2019. "The use of rush deliveries in periodic review assemble-to-order systems," Post-Print hal-01997380, HAL.
    5. Drent, Melvin & Moradi, Poulad & Arts, Joachim, 2023. "Efficient emission reduction through dynamic supply mode selection," European Journal of Operational Research, Elsevier, vol. 311(3), pages 925-941.
    6. Arts, Joachim, 2017. "A multi-item approach to repairable stocking and expediting in a fluctuating demand environment," European Journal of Operational Research, Elsevier, vol. 256(1), pages 102-115.
    7. van den Berg, D. & van der Heijden, M.C. & Schuur, P.C., 2016. "Allocating service parts in two-echelon networks at a utility company," International Journal of Production Economics, Elsevier, vol. 181(PA), pages 58-67.
    8. Johansen, Søren Glud & Thorstenson, Anders, 2014. "Emergency orders in the periodic-review inventory system with fixed ordering costs and compound Poisson demand," International Journal of Production Economics, Elsevier, vol. 157(C), pages 147-157.

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